Ibovespa Closes Lower Amid Lula’s Criticism and Global Concerns

On the last day of June, the Ibovespa index fell by 0.32%, closing at 123,906.55 points, a decrease of 401.28 points.

Despite this dip, the month ended with a 1.48% gain, making June only the second positive month of the year, following February’s 0.99% increase.

June 30th also marked the end of the week, the quarter, and the first half of the year. The week concluded with a 2.11% rise, continuing the previous week’s 1.40% gain.

However, the second quarter saw a 3.28% decline, and the first half of the year experienced a 7.66% drop. Earlier in the year, losses had reached nearly 11%, so the situation has somewhat improved.

In the United States, the market focus was on the Personal Consumption Expenditures (PCE) report for May.

The data met expectations but was not enough to prompt the Federal Reserve to lower interest rates.

Gustavo Sung, chief economist at Suno Research, noted that while the data was positive, it remained above desired levels.

He emphasized that the economic slowdown and initial cooling of inflation were insufficient for the Federal Open Market Committee (FOMC) to begin monetary easing.

Francisco Nobre from XP shared a similar view, noting that the market had stopped delaying rate-cut expectations.

In political news, Donald Trump was deemed the winner in a presidential debate against Joe Biden, who faces uncertainty regarding re-election.

This political landscape contributed to the commercial dollar rising by 1.46% to R$5.58, influenced by end-of-month Ptax rate formation.

Brazil’s Economic Debate

In Brazil, President Lula continued his criticism of the high Selic rate and the dollar’s rise.

He blamed derivative speculation for the dollar’s gains against the real and urged the Central Bank to investigate.

Lula reiterated his stance against fiscal adjustments affecting people with low income, ruling out changes to pensions and benefits like the Continuous Cash Benefit (BPC).

Roberto Campos Neto, the current Central Bank president, stated that an alternative inflation projection shows that interest rates are at 10.5% per year.

This indicates that the Selic rate is high enough to bring inflation to target over a longer period.

He also criticized revenue-focused fiscal adjustments, arguing they could lead to lower investment and slower economic growth.

Gabriel Galípolo, the likely next Central Bank president, emphasized that the institution’s autonomy does not mean ignoring society or the government.

He clarified that differing views on autonomy often stem from different interpretations.

Brazilian Market Highlights

Lula also criticized Vale (VALE3) for not compensating those affected by the Mariana and Brumadinho dam collapses, stating his willingness to negotiate payments.

Despite political noise, Vale’s shares rose by 1.07%, driven by iron ore prices in China and the sale of a stake in PT Vale Indonesia Tbk.

Petrobras (PETR4) gained 0.90%, but these gains were not enough to prevent the Ibovespa’s decline.

Major banks like BB (BBAS3) saw minor changes, while Bradesco (BBDC4) and Itaú Unibanco (ITUB4) had slight drops.

B3 (B3SA3) fell by 1.54%, with analysts citing lower volumes, prices, and potential new competitors.

Embraer (EMBR3) declined by 5.42%, and Equatorial (EQTL3) fell by 0.78%. Fleury (FLRY3) increased by 0.74%, Suzano (SUZB3) rose slightly, and Gol (GOLL4) gained 3%.

Data showed that the primary deficit rose to R$63.9 billion (2.53% of GDP). Meanwhile, the unemployment rate fell to 7.1% for the quarter ending in May, marking the lowest rate since 2014.

The Brazilian Economic Uncertainty Indicator (IIE-Br) decreased by 2.3 points in June. However, the three-month moving average increased by the same amount.

Next week includes key events such as a speech by Fed Chair Jerome Powell, the JOLTs jobs report, Brazil’s May industrial production, and the U.S. June payroll report.

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